Tehran and world powers struck a deal last month on Iran's contested nuclear program, and on Sunday Britain and Iran reopened their respective embassies after a break of several years.
Foreign Secretary Philip Hammond, who met Iranian President Hassan Rouhani in Tehran on Monday, said the two countries shared common ground despite a "deep legacy of distrust."
He said they agreed on the need to defeat the Islamic State group, and to stop opium from Afghanistan reaching Europe.
Hammond told the BBC that "Iran is too large a player, too important a player in this region, to simply leave in isolation."
Rouhani meanwhile dismissed any military option against his country's nuclear program as "ridiculous," after U.S. President Barack Obama last week said force remained on the table to prevent Iran from getting a nuclear weapon.
"These ridiculous expressions, slogans and irrelevant jokes damage the process of trust-building" between Iran and world powers, Rouhani said during his meeting with Hammond, according to the president's official website.
Obama has sought to address concerns among his fellow Democrats, who will need to support the nuclear deal to prevent the Republican-led Congress from derailing it.
Last week, Obama wrote to a Democratic lawmaker that if Iran rushes to build a nuclear weapon, "all of the options available to the United States — including the military option — will remain available."
The nuclear deal would curb Iran's nuclear activities and allow for greater international monitoring in return for sanctions relief.